Daily Markets: Powell Says Fed Funds Rate At Its 'Peak' But Won't Cut Yet

Today’s Big Picture

Asia-Pacific equity markets finished the day mixed. Hong Kong’s Hang Seng shed 1.27% in a broad decline led by Health Technology names, Japan’s Nikkei fell 1.23% as that market reacted to the Yen strengthening on news of accelerated wage growth, and China’s Shanghai Composite gave back 0.41%. India’s SENSEX closed flat, up a mere 0.05%, South Korea’s KOSPI gained 0.23%, Australia’s ASX All Ordinaries rose 0.46%, and Taiwan’s TAIEX closed 1.00% higher as Consumer Durables, Financials, and Industrial Services were the only positive sectors at the close. Major European markets are up across the board in midday trading and U.S. equity futures are pointing to a higher open.

Yesterday during his first day of back-to-back testimony in Washington, Fed Chair Powell signaled the policy rate is at its "peak for this tightening cycle," although he indicated that the central bank is not ready to begin cutting rates immediately Powell shared that he still expects a pivot to interest rate cuts this year. Powell will resume his testimony today at 10 AM ET, reiterating that perspective, which means we have little in the way of market-moving news this morning, leaving the market to relish that the expectation for rate cuts is not a matter of “if” but “when.”

Other Fed Speakers today include Cleveland Fed President Loretta Mester (11:30 AM ET and 1:20 PM ET), and odds are they will back comments made during Powell’s testimony. After today’s market close, we will have a wave of potentially market-moving earnings reports from Broadcom (AVGO), Marvell (MRVL), and Costco (COST) given what they may signal about the smartphone and data center markets as well as the consumer.

Data Download

International Economy

Exports from China surged 7.1% YoY to $528.01 billion in January-February 2024 combined, following a 2.3% gain in December 2023 and beating market forecasts of a 1.9% rise, signaling that global trade is starting to recover. Imports to China rose 3.5% YoY to $402.85 billion in the combined January-February 2024, beating market forecasts of a 1.5% growth and quickening from a 0.2% rise in December due to strong domestic demand during the year-end and Lunar New Year holidays.

The European Central Bank is widely expected to keep its policy rate at a record 4%, and President Christine Lagarde's message will be key for new economic projections.

Domestic Economy

This morning brings the latest figures for weekly initial and continuing jobless claims, which are expected to clock in at 215,000 and 1.889 million, respectively. Also coming our way will be the final readings for Nonfarm Productivity and Unit Labor Costs for 4Q2024, which are expected to be revised to 3.1% and 0.6%, respectively, from their prior reading of 4.9% and -1.1%.

The January Consumer Credit Report will be published at 3 PM ET today, and the market expects the headline figure will swell by $9.25 billion.

The U.S. House of Representatives passed legislation funding a broad swath of the federal government through the fiscal year that began in October, as yet another threat of a partial shutdown looms. It now goes to the Senate for passage by Friday, before a midnight deadline when temporary funding expires for several Washington agencies.

Markets

Equities responded well to Chair Powell’s comments yesterday. The only down sector was Consumer Discretionary, which fell 0.36% as declines in Amazon (AMZN) and Tesla (TSLA) combined to contribute to just over 110% of the sector's return. Leadership came from Consumer Staples (0.84%), aided by a positive day from Costco Wholesale, Altria Group (MO), and Target (TGT) which combined to contribute just under 60% of the sector's result. Broad market indices ended the day ahead with the Dow gaining 0.20%, the S&P 500 rising 0.51%, the Nasdaq Composite adding 0.58%, and the Rusell Composite closing 0.70% higher.

Shares of Dexcom (DXCM) ended the day 9.80% higher after they received FDA approval for a non-prescription (over-the-counter) continuous glucose monitor device. Here’s how the major market indicators stack up year-to-date:

• Dow Jones Industrial Average: 2.58%
• S&P 500: 7.02%
• Nasdaq Composite: 6.08%
• Russell 2000: 2.02%
• Bitcoin (BTC-USD): 57.49%
• Ether (ETH-USD): 66.22%

Stocks to Watch

American Eagle (AEO), Big Lots (BIG), BJ’s Wholesale (BJ), Burlington Stores (BURL), Ciena (CIEN), Kroger (KR), and PaySafe (PSFE) are expected to release quarterly earnings before equities begin trading later this morning.

Pre-market breadth is fairly average today as 247 names in the S&P 500 have traded hands so far this morning with 153 gainers and 94 decliners. High volume names topping the decliners leaderboard include Eli Lily & Company (LLY), Albemarle Corporation (ABL), and Tesla (TSLA) while Micron Technology (MU), Broadcom (AVGO), and Intel (INTC) (more below) are seeing some positive pressure ahead of the open.

Shares of the Honest Company (HNST) jumped in aftermarket trading last night after reporting consensus topping top and bottom line results for its December quarter that included a surprise bottom line profit. By category, the company’s Diapers and Wipes revenue increased by 15% during the quarter, Skin and Personal Care revenue declined by 6% in the quarter, and Household and Wellness revenue increased by 28% reflecting the strong performance of the baby clothing business. Digital revenue increased 28%, driven by meaningful growth with Amazon (AMZN). For 2024, the company expects revenue growth in the low-to-mid single-digit percentage range, with the first half of 2024 anticipated to be softer than the second half.

Digital transformation company OneSpan (OSPN) handily beat December quarter expectations and guided 2024 revenue ahead of market forecasts. Average recurring revenue exiting 2023 grew 11% YoY to $154.6 million and management sees 2024 revenue in the range of $238-$246 million compared to the $237.90 million consensus.

Shares of Victoria’s Secret (VSCO) tumbled after the company warned of a potential loss in the current quarter due to ongoing challenges in its intimates category. That outlook overshadowed the company’s better-than-expected January quarter EPS of $2.58. For its April quarter, the company guided net sales to fall mid-single digits, a greater decline than the -1% consensus forecast.

Buckle (BKE) reported its February comp store sales grew 11.5% YoY and net sales for the period decreased 5.2% YoY to $78.2 million.

The U.S. government is expected to invest $3.5 billion in Intel (INTC) to make advanced semiconductors for military and intelligence programs. The money is part of the larger $39B Chips and Science Act grant pool which is aimed at boosting semiconductor manufacturing in the U.S.

IPOs

Readers who want to dig deeper into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page.

After Today’s Market Close

Broadcom (AVGO), Costco (COST), DocuSign (DOCU), Fuko (FNKO), Gap (GPS), Marvell (MRVL), and Traeger (COOK) are expected to report quarterly results after equities stop trading today. Those looking for more on upcoming quarterly earnings reports should head on over to Nasdaq’s Earnings Calendar.

On the Horizon

Friday, March 8

• Japan: Eco Watchers Survey - February
• Eurozone: Employment Change, GDP - 4Q 2024
• US: Employment Report - February

Thought for the Day

“The beautiful thing about learning is that nobody can take it away from you.” ~ BB King

Disclosures

• Broadcom (AVGO), Intel (INTC), Marvell (MRVL) is a constituent of the Tematica BITA Digital Infrastructure & Connectivity Index
• Costco Wholesale (COST) is a constituent of the Tematica BITA Big Spenders & Savers Index

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Other Topics

Stocks Economy Earnings Central Banks